BBB Alert: Credit repair scams and debt relief fraudsters are targeting tax season

The Better Business Bureau’s annual tax season warning is out, and the numbers tell a familiar story: People in financial trouble are being exploited by companies that make promises that are illegal, impossible, or both.

Here’s what consumers are dealing with right now – and what really works.

In numbers: what debt relief and credit repair fraud cost consumers

The BBB has been following this pattern for years. In a detailed investigation spanning January 2020 through mid-2023, the BBB found more than 11,000 complaints and nearly 900 negative reviews for debt relief and credit repair companies – along with more than 1,600 Scam Tracker reports. More than half of those who reported a scam lost money.

The average loss of $450 sounds modest. But $450 to someone already struggling with debt could mean a missed utility payment or a bounced rent check. And the outliers are brutal: One consumer lost $27,000 through a debt relief program that was supposed to eliminate $36,000 in debt. After three years and $27,000 in payments, only $5,780 had gone to actual creditors; the rest went to reimbursements. (Source: BBB survey)

Four types of scams the BBB is currently identifying

The BBB identifies four specific categories of fraudulent operations targeting consumers this tax season:

• Fake credit counseling agencies — Posing as educational or nonprofit organizations, charging for services that legitimate nonprofit organizations provide for free or at low cost
• Fraudulent debt consolidation companies — Commit to combining your debts into one lower payment; taking the money without ever contacting your creditors
• Fake debt relief/settlement companies — Claim to negotiate with creditors on your behalf; collect ongoing fees as you fall further behind
• Illegal credit repair agencies — Promise to remove accurate negative information from your credit report; this is both impossible and illegal to guarantee

The warning signs are always the same

I’ve been covering this space since 1994 and the warning signs have never changed:

A real case: $1,550 disappeared in Missouri

Here’s how it actually works out. In March 2025, a consumer in Hollister, Missouri came across a seemingly legitimate debt relief company. They had a professional website, social media presence, and glowing testimonials. The consumer handed over $1,550.

The website and social accounts were fake. The testimonies are fabricated. The $1,550 was gone. (Source: KY3 News / BBB)

Here’s the playbook: Create urgency around the stress of tax season, build just enough credibility to get someone to hand over money, and then disappear. Sometimes they stick around long enough to collect several payments before disappearing.

Before you sign anything, use this free tool

What you can actually do – for free

• Dispute credit report errors yourself — Contact Equifax, Experian and TransUnion directly at AnnualCreditReport.com. Free weekly reports. Disputes are free. No middleman needed.
• Negotiate directly with creditors — Most creditors have hardship programs. Call the number on the back of your card and ask. You don’t have to pay someone $500 to make a phone call that you can make yourself.
• Use a legitimate nonprofit — NFCC member agencies are real credit counselors, not salespeople. Many ask for little or nothing. Start at NFCC.org.
• Know your real options — Debt settlement, bankruptcy and debt management plans are real tools. Take the free quiz to understand which options apply to your situation.
• Report scams — File with BBB scam trackerthe FTC at ReportFraud.ftc.gov, and your attorney general. Your rapport protects the next person.

Frequently asked questions

What are the biggest warning signs that a debt relief company is a scam?

The most reliable warning sign is any requirement for advance payment before services are provided. Federal law prohibits debt settlement and credit repair companies from collecting fees before completing promised services. Other warning signs: guaranteed results (no company can guarantee that creditors will settle or that credit scores will increase by a certain amount), pressure to stop communicating with your creditors, and promises to remove accurate negative information from your credit report. The BBB tracked more than 11,000 complaints against these types of companies between 2020 and mid-2023.

Can a company legally remove negative items from my credit report?

Only if these items are inaccurate or unverifiable. Accurate negative information (late payments, charges, collections) legally remains on your report for seven years (ten years for Chapter 7 bankruptcy). Any company that promises to remove legitimate negative items is lying or suggesting illegal methods, such as disputing accurate information or creating a “new” credit identity using an employer identification number instead of your Social Security number. Both are illegal.

Why do debt relief scams spike during tax season?

Tax season brings financial stress and urgency. People assess their financial situation, see debt balances and feel pressure to take action. Scammers take advantage of this window because someone who is concerned about money is more likely to respond to a promised quick solution. The BBB’s 2025 data, consisting of 422 scam reports and an average loss of $450, reflects consumers making hasty decisions driven by that stress rather than careful research.

What is the difference between a legitimate credit counselor and a scam?

Legitimate nonprofit credit counselors – members of the National Foundation for Credit Counseling (NFCC) – charge little or nothing for initial consultations, explain all your options, including those that don’t involve paying, and only enroll in debt management plans if it truly fits your situation. They cannot guarantee results, cannot promise to remove accurate credit information, and do not charge high upfront fees. Scam operations typically pressure you to provide paid services immediately, provide guarantees that no legitimate company can provide, and disappear once they have your money.

What should I do if I have already paid a debt relief scam company?

Document everything: receipts, contracts, communications records. File complaints with the BBB Scam Tracker, the FTC at ReportFraud.ftc.gov, and your attorney general’s consumer protection office. If you paid by credit card, please contact your card issuer for a chargeback. If you paid by wire transfer or gift card, chargeback is unlikely, but filing the report is still important: it protects other consumers and helps with enforcement action.

Source: KY3 News: BBB warns of credit repair and debt relief scams as tax season approaches | BBB Survey: Debt Relief and Credit Repair Companies

Consumer debt expert and investigative writer. Survivor of Personal Bankruptcy (1990). Award-winning author of the Washington Post. Exposing debt fraud since 1994.